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Low Oil Prices Force Alaska to Reevaluate Business Strategies

© AP Photo / Hasan JamaliOil production.
Oil production. - Sputnik International
Press Secretary of Alaska’s Governor says that with oil prices running low, Alaska is facing a fiscal challenge, and it will have to change existing business practices to survive in new conditions.


WASHINGTON, January 23 (Sputnik) — With oil prices running low, Alaska is facing a fiscal challenge, and it will have to change existing business practices to survive in new conditions, Press Secretary of Alaska’s Governor Bill Walker Grace Jang told Sputnik News Agency Friday.

“Governor Walker wants to change the way of doing business by basically doing more with less, hiring locally from within Alaska and using more public-private, state-tribal partnerships,” Jang said explaining why Governor Walker referred to the budget deficit as an opportunity to make constructive changes in his State of the Budget speech on Thursday.

Alaska Governor Bill Walker - Sputnik International
Alaska Admits Oil Price Drop Presents Job Threat to Local Economy
According to the governor’s address, dropping oil prices moved the state from a $7 million-per-day deficit during summer of 2014 to a $10 million-per-day at the present moment. Total budget deficit is expected to be at least $3.5 billion in 2015. In his State of the Budget speech Walker said he will propose a $550-million budget cut for next year, with scarce spending affecting every agency.

“As you know, about 90 percent of the State’s general fund comes from oil revenue. This means Alaska’s State government funding has two drivers: oil price and oil production. Unfortunately, neither is going in our favor,” Walker said in a speech to a joint session of the legislature explaining the situation.

To cope with the budget deficit, Alaska will have to tap into its $14 billion savings, but they will last only for three years, according to the speech.

In December 2014, attempting to save money, Governor Walker issued an administrative order to stop non-obligated spending on six projects, including a small-diameter gas pipeline from the state’s North Slope and the Kodiak rocket launch complex. According to the State of the Budget address, the state will try to build a sustainable fiscal platform through improving oil production and will depend more on natural gas, other natural resources and the broader economy.

The price of oil has dropped by more than 50 percent over the past six month from $110 a barrel in summer 2014 to less than $50 a barrel at the present moment, causing economic problems in many oil exporting nations.


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